Conceptual framework is defined as the “a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function, and limits of financial accounting and financial statements.” [wiley.com, 2002]. The conceptual framework is needed in the accounting body due to two reasons. Firstly, to be beneficial, standard setting must form on and transmit to a well-known body of concepts and purposes. Secondly, new and developing real-world troubles should be more rapidly solved by reference to a current framework of basic concept.

In a wide sense a conceptual framework is able to be seen as an effort to describe the character and reason of accounting. A conceptual framework should take into account the theoretical and conceptual matters containing financial description and structure a logical and reliable foundation so as to strengthen the development of accounting standards. The purpose of conceptual framework is to assist the IASB in developing a consistent basis for upcoming accounting standards that are principles-based, internally dependable, globally converged and also examine the existing ones. [ifrs.org, 2012]

International Accounting Standards Board (IASB)

The IASB framework defines the ideas and principles fundamental in the preparation of financial statements for presentation to widespread users. This framework operates as a principle, a parameter and sets out the reach of International Accounting Standards. It denotes the very establishment of international financial reporting and denotes the basis from which all IASs emanate [articlesbase.com, 2012] .The IASB framework is the most commonly appropriate conceptual framework which was submitted in 1989. The IASB’s conceptual framework sets International Financial Reporting Standards that have to be persuaded by the associates.

The further main panel whose conceptual framework is most commonly appropriate is the Financial Accounting Standards Board (FASB), which is persuaded by United States of America. A common aim of the IASB and FASB - an objective shared by their components - is for their standards to be clearly based on dependable and suitable standards. These standards must be entrenched in primary economic concepts rather than based on a collection of subjective conferences. To offer the most excellent foundation for developing principle based, general standards, the boards are undertaking a combined assignment to build up an ordinary and enhanced conceptual framework. In October 2004, the IASB and the FASB came up with a combined conceptual framework project. The aim of the combined framework is for the standards to be based on reliable and suitable principles. It also concentrates on eliminating dissimilarities relating to IFRS and the GAAP by using just a single group of standards. On September 2010, the FASB and IASB declared that the initial phase of their combined project is to build up an advanced conceptual framework for the GAAP and IFRS had been accomplished [ifrs.org, 2012]. The IASB established its monetary reporting standards on the conceptual framework that was approved in 2010. The conceptual framework was built up by IASB and it places down the fundamental theories and standards that act as the establishment for arrangement and presentation of the financial statements. The framework is also used as manual to extend or advance the standards and to settle any accounting disagreements [financetrain.com, 2012]

Advantages and Disadvantages of Conceptual Framework

According to one of source [Financial Reporting Paper F7 (International), p.1.3], there are few advantages, as follows. First, the conceptual framework has made preparation and presentation of financial statement much easier...

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